Understanding the 4 Types of Risks Involved in Project Management
Complex projects are always fraught with a variety of risks ranging from scope risk to cost overruns. One of the main duties of a project manager is to manage these risks and prevent them from ruining the project. In this post, I will cover the major risks involved in a typical project.
1. Scope Risk
This risk includes changes in scope caused by the following factors:
- Scope creep – the project grows in complexity as clients add to the requirements and developers start gold plating.
- Integration issues
- Hardware & Software defects
- Change in dependencies
2. Scheduling Risk
There are a number of reasons why the project might not proceed in the way you scheduled. These include unexpected delays at an external vendor, natural factors, errors in estimation and delays in acquisition of parts. For instance, the test team cannot begin the work until the developers finish their milestone deliverables and a delay in those can cause cascading delays.
To reduce scheduling risks use tools such as a Work Breakdown Structure (WBS) and RACI matrix (Responsibilities, Accountabilities, Consulting and Information) and Gantt charts to help you in scheduling.
3. Resource Risk
This risk mainly arises from outsourcing and personnel related issues. A big project might involve dozens or even hundreds of employees and it is essential to manage the attrition issues and leaving of key personnel. Bringing in a new worker at a later stage in the project can significantly slow down the project.
Apart from attrition, there is a skill related risk too. For instance, if the project requires a lot of website front end work and your team doesn’t have a designer skilled in HTML/CSS, you could face unexpected delays there.
Another source of the risk includes lack of availability of funds. This could happen if you are relying on an external source of funding (such as a client who pays per milestone) and the client suddenly faces a cash crunch.
4. Technology Risk
This risk includes delays arising out of software & hardware defects or the failure of an underlying service or a platform. For instance, halfway through the project you might realize the cloud service provider you are using doesn’t satisfy your performance benchmarks. Apart from this, there could be issues in the platform used to build your software or a software update of a critical tool that no longer supports some of your functions.
Using a Project Management Tool to Help Mitigate Risk?
Many of the risks mentioned above could be minimized or eliminated by implementing robust project management tracking and communication through the many online tools now available. Take at look at a two mentioned below to see if one could fit in your reality:
If you want to go deeper into this subject, you could consider buying the book that is suggested for PMI preparation – Identifying and Managing Project Risk: Essential Tools for Failure-Proofing Your Project.